CYBG shares down 15% amid loss and PPI hit

UPDATE 2 — Shares of Clydesdale and Yorkshire Bank owner CYBG fell more than 15% on Tuesday after it said it increased underlying profit before tax 13% to £331 million in the 12 months to September 30, but made a statutory loss after tax of £145 million due to legacy PPI costs.

Glasgow-based CYBG said it had customer deposit growth of 4.2% to £28.9 billion and loan growth of 4.1% to £33.3 billion.

It reported “above system lending growth” with mortgages up 4.5% to £24.5 billion and core SME up 5.6% to £7.2 billion.

Total PPI provision during 2018 was £352 million, net of conduct indemnity, with £44 million “for other legacy conduct.”

CYBG said: “While weekly complaint volumes have been falling since the end of July, the group considers it prudent to take a further £150 million increase in provisions for legacy PPI costs to cover the costs associated with a revised estimate of 83,000 future walk-in complaints out to the August 2019 time bar.”

CYBG CEO David Duffy said: “It has been a landmark year for CYBG, continuing to deliver ahead of market growth and meeting our underlying financial targets in a highly competitive market, while also completing the transformational Virgin Money acquisition in October 2018 following overwhelming shareholder support.

“In a competitive market, we have delivered an increase in underlying profits, returns and capital generation – all of which means we are delighted to recommend an increase to last year’s inaugural CYBG dividend, payable to all shareholders.

“We have planned for a period of uncertainty, but it is impossible to ignore the lower levels of business confidence, especially for SMEs, while the final specific outcome of negotiations remains unclear.

“CYBG has a bright future with a unique combination of growth opportunities.

“We will participate strongly in the RBS alternative remedies schemes, have a stronger competitive edge as the first IRB accredited bank since the financial crisis, can fully leverage our iB platform in the new Open Banking landscape, and, of course, our combination with Virgin Money creates a genuine national competitor to the banking status quo.”